As both analysts and hospital leaders continue to deepen their understanding of the impact of recently enacted federal legislation that will chop nearly $1 trillion from Medicaid over the next decade, a new study shows that Medicaid work requirements alone could see hospitals’ operating margins drop by double digits.
A report released earlier this month by the Commonwealth Fund points out that initial analyses of mandatory federal work requirements for Americans covered by the Affordable Care Act’s Medicaid (Medi-Cal in California) eligibility expansion focused on potential coverage losses, but overlooked the financial impact on health care providers.
Several of the report’s findings are highly alarming, as hospitals continue to teeter on a financial cliff:
- Nearly 3,000 U.S. general acute care hospitals could see an 11.7% to 13.3% cut in their operating margins in 2027.
- These percentages equate to $10.9 billion to $12.4 billion in projected revenue losses for hospitals.
- While operating margin reductions between 11.7% and 13.3% are predicted, patient care margins could fall between 14.7% and 16.7% in 2027.
- Safety-net hospitals face a sharper decrease in operating margins, with a projected 25.9% to 29.6% reduction.
- Between 5.1 million and 5.8 million people will become uninsured.
These numbers underscore the grim choices that many hospitals may have to make in the coming months and years. From the report:
“These adverse outcomes will affect not only Medicaid patients but the broader community as well, since lower revenues and increased uncompensated care could force many hospitals to reduce staff and payroll or eliminate important clinical services used by all patients.”
While the precise impact from the new federal policy can’t truly be calculated until the changes go into effect, studies like these are harbingers — warnings that, depending on state-, local-, and hospital-level responses, could determine in what way patients and communities are affected.
That means those entities, working together, now have an opportunity to shape the future for those who rely on hospital care. It is in these times that connection, listening, and learning are critical if we are to shape a brighter future for health care in California.
